Folks,
Market Observations for the Week: After the Tuesday $TRIN closed > 2.0, the SPX opened strong and ran up 85 points before the news of the first Omicron case was confirmed in California and then the SPX fell to lows for the week – this is bear market action! The Russell 2000 made an all-time high on 11/8 and then declined in 5-waves down on the daily chart into Tuesday and then continued to decline down to lower lows today – did the broad market roll over into a bear market ahead of the all-time highs in the SPX and NDX last week? CEOs and other corporate insiders sold a record $69B of stock this year – an all-time record. The Fed intends to make inflation its number one target and Powell hinted that a more aggressive taper would be discussed at the December Fed meeting. So essentially, the SPX is getting hit with a one-two punch from the Omicron variant and a more aggressive Fed today and are trading below some heavy Dark Pool sell prints on the SPY. We should see a rebound attempt from the NDX and SPX into the 12/3 NFP jobs report which is in the 12/3-12/6 New Moon Timing Window – but if the rally is corrective watch out below. Both the NYA (NYSE Composite) and the IWM finished an EW 5-wave decline on the daily chart on heavy volume days Tuesday – we only expect a retracement bounce into the weekend New Moon. The ADP report early Wednesday and the NFP jobs report early Friday will be key reports for this week – weaker than expected reports could cause more market angst. We remain in 50% cash because of the macro factors facing the global economy (Chinese credit contraction, rising global inflation, and rising global rates, new Covid variant, etc.) and now a more aggressive Fed that wants to rein in inflation. Crude oil is rolling over and is testing $64.43 – a breakdown in crude oil would be a deflationary signal. The GDX is leading the stock market down here – the PM sector tends to trend down into Friday’s NFP jobs report. The USD declined in 5-waves on the hourly chart before spiking higher to 96.61 after the start of Powell’s testimony.
12/01/21 (Commentary for Wednesday) The big range days over the last two weeks in the NDX and SPX is indicative of a BULL MARKET TOP – the one-two punch of the Omicron variant and a hawkish Fed is toppling the SPX and NDX over into a bear market after the broad market topped with the Russell 2000 on 11/8. The swing of the Fed’s focus to target inflation over further employment gains hit and the potential economic fallout from the Omicron variant hit the SPX hard on Wednesday. Chairman Powell said that he will present a “more aggressive tapering plan” to the new FOMC at the December meeting. When the Fed has drained liquidity from the financial markets via cuts in bond purchases, big moves down have started in the stock market since 2008. Once again, the SPX gave us a strong opening rally that fizzled – this is bear market action. Bitcoin is falling back into its down channel from 11/8 and this looks bearish for the stock market. The trendlines from the Covid low on 3/23 turned back the last speculative highs in TSLA, Bitcoin, and the IWM near the 11/4 New Moon and then the NYSE Composite gave us an EW 5-waves down on the daily chart into Tuesday – this has bearish implications for the stock market after a retracement rally into the New Moon weekend. We still hold 50% cash as we feel that the macro risks of being 100% long are just too great with the global credit contraction led by China still progressing and a now more aggressive Fed targeting inflation. Another scary signal came from news that the down payments of 20% of first home buyers came from Bitcoin profits last week – the US economy is highly-levered to widespread speculation in stocks, stock options and digital currencies. Gold and the GDX are trending down into Friday’s NFP jobs report. Crude oil rolled over again today to test $64.43 which is a deflationary signal. Bonds rallied in 5-waves into Wednesday despite the hawkish tone taken by Chairman Powell on inflation. In the US, the background monetary conditions have been deteriorating for months but the Fed looks determined to quicken the withdrawal of financial liquidity from the US stock market at the December meeting despite slowing global growth concerns. The USD declined in 5-waves on the hourly chart going into Powell’s testimony but did get a spike higher to 96.61 which petered out into the close.
Big Picture on Stocks (UPDATED) –The SPX is sub-dividing down in an aggressive manner and the Russell 2000 and the NYSE Composite have already given us an EW 5-wave decline on the daily chart into Tuesday which is a bear market signal. A corrective rebound rally into Friday/Monday should be shorted.
Big Picture on PMs (UPDATED) – Gold and the GDX are trending down into Friday’s NFP jobs report – a break below $1758 gold will be very bearish in our work.
- Stocks – The Russell 2000 and the NYSE Composite have already entered bear market territory with an EW 5-waves down on the daily chart, but now the SPX and NDX sub-dividing down aggressively. Just a corrective bounce in the SPX and the NDX into Friday/Monday should be shorted.
- Gold – Gold continues to trend down into Friday’s NFP jobs report. An undercut low below $1758 would be bearish.
- Silver – Silver took out $22.65 on Wednesday and looks lower.
- Bonds – Bonds continued to rally on Wednesday despite the hawkish tone from Chairman Powell.
- Crude Oil – Crude oil is rolling over and threatening to test $64.43 on Wednesday – the Dark Pool has been selling the oil stocks.
- Dollar Index –The USD declined in 5-waves on the hourly chart into Chairman Powell’s statement and then briefly spiked to 96.64 on Tuesday.
TURNING POINT DAY
The turn window for this week is 12/3-12/6, the New Moon Timing Window.
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